<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
GENERAL RE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
LOGO
GENERAL RE CORPORATION
695 EAST MAIN STREET
STAMFORD, CONNECTICUT 06904-2351
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 23, 1997
The annual meeting of the stockholders of General Re Corporation will be
held on May 23, 1997 at 9:00 a.m. at the offices of the Corporation, 695 East
Main Street, Stamford, Connecticut for the following purposes:
(1) To elect directors;
(2) To consider and act upon a proposal to ratify the selection of
independent public accountants; and
(3) To transact any and all other business which may properly come
before the meeting.
Only stockholders of record at the close of business on March 26, 1997 are
entitled to notice of and to vote at this meeting or any adjournment thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE DATE AND SIGN THE
ENCLOSED PROXY/DIRECTION CARD(S) AND RETURN THE PROXY/DIRECTION CARD(S) PROMPTLY
IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
Charles F. Barr, Secretary
Stamford, Connecticut
March 28, 1997
<PAGE> 3
GENERAL RE CORPORATION
695 EAST MAIN STREET
STAMFORD, CONNECTICUT 06904-2351
PROXY STATEMENT
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of the
Corporation for use at the annual meeting of stockholders to be held on May 23,
1997. The proxy, when properly executed and received by the Secretary prior to
the meeting, will be voted unless revoked. Any stockholder giving a proxy has
the power to revoke it at any time prior to voting by a later dated proxy,
notice in writing or attendance at the meeting and election to vote in person.
Except to the extent that contrary instructions are given by stockholders, it is
the intention of the persons named in the proxy to vote as follows:
(1) For the election of each nominee named under the caption "Election
of Directors";
(2) For the proposal to ratify the selection of independent public
accountants; and
(3) In the discretion of the proxies, on any other matters that may
properly come before the meeting.
This proxy statement and the accompanying proxy/direction card(s) are being
mailed on or about March 28, 1997. Only stockholders of record on the books of
the Corporation at the close of business on March 26, 1997 will be entitled to
vote at the annual meeting. On that date, there were 80,818,987 shares of common
stock, $.50 par value (the "Common Stock"), issued and outstanding and 1,709,437
shares of convertible preferred stock, no par value (the "Preferred Stock"),
issued and outstanding. Each holder of shares of Common Stock is entitled to one
vote per share. Each share of Preferred Stock is entitled to the number of votes
equal to the number of shares of Common Stock into which such share of Preferred
Stock could be converted on the record date for determining the stockholders
entitled to vote, rounded to the nearest one-tenth of a vote. As of March 26,
1997, each beneficial owner of shares of Preferred Stock is entitled to one vote
per share. The presence of the holders of a majority of the outstanding shares
of Common Stock and Preferred Stock will constitute a quorum for the transaction
of business at the annual meeting, but if a quorum is not present, in person or
by proxy, the meeting may adjourn from time to time until a quorum is obtained.
The affirmative vote of a majority of the outstanding shares of Common
Stock and Preferred Stock present in person or represented by proxy at the
meeting and entitled to vote, voting together and not as separate classes, is
required for the election of directors and the ratification of the selection of
independent public accountants. Shares represented by proxies that are marked
"ABSTAIN" or "WITHHELD" with respect to a specific matter are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. Shares represented by proxies which are marked "WITHHELD" with
regard to the election of directors will be excluded entirely from the vote and
will have no effect. Shares represented by proxies which are marked "ABSTAIN"
with respect to the ratification of the selection of independent public
accountants will have the effect of a negative vote because this matter requires
the affirmative vote of a majority of shares present in person or represented by
proxy.
<PAGE> 4
The proxy/direction card(s) will serve to direct the trustees of the
Employee Savings and Stock Ownership Plan of General Re Corporation and its
subsidiaries (the "ESSOP") on how to vote shares of the Corporation's Common
Stock and Preferred Stock held by such plan. Printed on the proxy/ direction
card(s) accompanying this proxy statement, if applicable, is the number of
shares of Common Stock and/or Preferred Stock allocated to a participant in such
plan. The directions given by the participants will also serve to direct the
trustee on how to vote a proportionate number of shares of Preferred Stock held
by the trustee which have not been allocated to employee accounts or for which
no directions have been received.
BOARD OF DIRECTORS
The Corporation's By-laws provide that the Board of Directors shall consist
of not less than nine nor more than 21 members as established from time to time
by the directors or the stockholders pursuant to the provisions of the By-laws,
provided that the number of directors in each of the three classes of directors
is as nearly equal as possible. The Board of Directors currently consists of 12
members. The members of each class are elected to serve for a term of three
years and until their successors are elected, or until the annual meeting of
stockholders next following a member's 72nd birthday, or a member's resignation,
removal or ineligibility. After the annual meeting of stockholders, the Board of
Directors will consist of 11 members because Edward H. Malone, now 72, will
retire from the Board.
Under the present schedule, regular meetings of the Board of Directors are
held eight times each year and additional special meetings are called whenever
necessary. The Board met nine times in 1996.
The Board of Directors has established an Executive Committee to exercise
the powers of the Board during the intervals between meetings of the Board. The
members of the Executive Committee are Ronald E. Ferguson, Chairman, William C.
Ferguson, Donald J. Kirk, David E. McKinney, Andrew W. Mathieson and Stephen A.
Ross. The Executive Committee did not meet in 1996.
The Board of Directors has established a Finance Committee to review and
monitor the financial affairs of the Corporation, including its investment
strategy, capital resources and expenditures, subsidiary and stockholder
dividends, foreign currency positions and commercial and investment banking
relationships. The Finance Committee's responsibilities also include the review
of the actuarial assumptions and annual contributions to the Corporation's
pension plans and the selection of trustees, investment managers and independent
actuaries for the Corporation's pension plans and the ESSOP. The members of the
Finance Committee are Ronald E. Ferguson, Chairman, Walter M. Cabot, Donald J.
Kirk, Edward H. Malone, David E. McKinney, Andrew W. Mathieson, Stephen A. Ross
and Walter F. Williams. The Finance Committee met six times in 1996.
The Board of Directors has established an Audit Committee consisting of
Donald J. Kirk, Chairman, Lucy Wilson Benson, Kay Koplovitz, Martin G. McGuinn
and Walter F. Williams, all of whom are non-employee directors. This Committee
oversees management's discharge of its financial reporting responsibilities and
recommends appointment of the Corporation's independent public accountants. The
Audit Committee met three times in 1996.
The Board has established a Compensation and Personnel Committee consisting
of Andrew W. Mathieson, Chairman, Walter M. Cabot, William C. Ferguson, Kay
Koplovitz, Edward H. Malone and David E. McKinney, all of whom are non-employee
directors. This Committee approves and reviews with the Board all aspects of the
Corporation's human resources (including personnel policies, controls, and
compensation and benefit programs), the performance of the senior officers and
the compensation of the Chairman, President and senior officers and administers
the General Re Corporation 1995 Long-Term Compensation Plan. The Compensation
and Personnel Committee met four times in 1996.
2
<PAGE> 5
The Board has established a Committee on Directors consisting of
non-employee directors William C. Ferguson, Chairman, Lucy Wilson Benson, Martin
G. McGuinn and Andrew W. Mathieson to recommend board committee structure,
recommend a plan of compensation and benefits for non-employee directors,
establish criteria for selection of directors, review directors' performance and
propose nominees for election to the Board. It met three times in 1996. The
Committee annually assesses the Corporation's corporate governance structure and
practices and compares them to those of other companies. Based upon the most
recent annual review, the Committee concluded that the Corporation's governance
was consistent with the best interests of stockholders. The Committee on
Directors will consider nominations submitted by stockholders. Nominations
submitted in writing by stockholders must be received by the Secretary of the
Corporation not less than 60 days nor more than 90 days prior to an annual
meeting. This notice must include the information concerning the nominee that
must be disclosed under Regulation 14A of the Securities Exchange Act of 1934,
as amended. The notice must be accompanied by the written consent of each
proposed nominee to serve as a director of the Corporation if so elected.
The Board has established a Shareholder Relations and Public Affairs
Committee consisting of non-employee directors Lucy Wilson Benson, Chairman,
William C. Ferguson, Donald J. Kirk and Walter F. Williams to consider matters
of special interest to stockholders, such as stockholder proposals, and policies
and procedures concerning services to stockholders and to oversee federal and
state governmental processes including legislation and regulation affecting the
Corporation. No stockholder proposals were received during 1996. The Committee
also reviews and approves the Corporation's annual budget for charitable
contributions. The Committee met twice during the year.
All of the directors attended at least 75% of the aggregate of the meetings
of the Board and of the committees on which they served during 1996.
ELECTION OF DIRECTORS
Three directors have been nominated for reelection at the annual meeting.
They are Ronald E. Ferguson, a director since 1983 and the Chairman and Chief
Executive Officer of the Corporation since 1987, Donald J. Kirk, a director
since 1987, and Walter M. Cabot, a director since 1979.
It is intended that the proxies received will be voted for the three
nominees unless otherwise provided therein. Management knows of no reason why
any of these nominees will be unable to serve, but, in such event, the proxies
received will be voted for such substitute nominees as the Committee on
Directors may recommend, but in no event will proxies received be voted for a
greater number of persons than the number of nominees.
3
<PAGE> 6
The names, ages, terms of office, and certain other information as of March
1, 1997 with respect to the persons nominated for election as directors and
other persons serving as directors are as follows:
INFORMATION CONCERNING NOMINEES FOR TERMS EXPIRING IN 2000:
<TABLE>
<S> <C>
R. FERGUSON RONALD E. FERGUSON, 55, a director of the Corporation since 1983,
PHOTO has been Chairman and Chief Executive Officer of the Corporation
(e)(f) since 1987. He has been with the Corporation since 1969. He serves
on the boards of directors of Colgate-Palmolive Company and General
Signal Corporation.
KIRK PHOTO DONALD J. KIRK, 64, a director of the Corporation since 1987, is an
(a)(e)(f)(s) Executive- in-Residence, Columbia University Graduate School of
Business, where he was a professor from 1987 to 1994. He was
Chairman of the Financial Accounting Standards Board from 1978 to
1986. In 1995, he became a Member of the Public Oversight Board of
the American Institute of Certified Public Accountants' SEC Practice
Section. In 1996, he became a Public Governor of the National
Association of Securities Dealers, Inc. He is a trustee of the
Fidelity Group of Mutual Funds and served as a director of Valuation
Research Corporation from 1993 to 1995. He serves as Chairman of the
board of trustees of Greenwich Hospital and as Chairman of the board
of directors of the National Arts Stabilization Fund.
CABOT PHOTO WALTER M. CABOT, 64, a director of the Corporation since 1979, has
(c)(f) been Senior Advisor to and Director of Standish, Ayer & Wood,
investment managers, since 1991. He previously served as President
(1974-1990) and Senior Advisor (1990-1991) of Harvard Management
Company, Inc., an endowment management company. He is a trustee of
Property Capital Trust and serves on the board of directors of
Rockefeller Financial Service, Inc. He serves as a trustee and
treasurer of Wellesley College and is Chairman of the board of
overseers of New England Medical Center.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES FOR ELECTION AS DIRECTORS.
INFORMATION CONCERNING DIRECTORS WHOSE TERMS EXPIRE IN 1998:
<TABLE>
<S> <C>
BENSON PHOTO LUCY WILSON BENSON, 69, a director of the Corporation since 1990,
(a)(d)(s) has been President of Benson and Associates, consultants to business
and government, since 1981. She served as Under Secretary of State
for Security Assistance, Science and Technology from 1977 to 1980.
She serves on the boards of directors of COMSAT Corporation, various
Dreyfus Mutual Funds, International Executive Service Corps and
Logistics Management Institute. She is a trustee of the Alfred P.
Sloan Foundation, Vice Chairman of the board of trustees of
Lafayette College, Vice Chairman of the Atlantic Council of the
United States and Vice Chairman of the Citizens Network for Foreign
Affairs.
</TABLE>
4
<PAGE> 7
<TABLE>
<S> <C>
W. FERGUSON WILLIAM C. FERGUSON, 66, has been a director of the Corporation
PHOTO since 1987. He previously served as Chairman and Chief Executive
(c)(d)(e)(s) Officer of NYNEX Corporation (1989-1995). He also serves on the
board of directors of CPC International, Inc.
KOPLOVITZ PHOTO KAY KOPLOVITZ, 51, a director of the Corporation since 1990, is the
(a)(c) founder and has been Chairman and Chief Executive Officer of USA
Networks, an international cable television programming company,
since 1980. She serves on the boards of directors of Liz Claiborne,
Inc., Nabisco Holdings Corp., the Museum of Television and Radio and
the National Cable Television Association, and on the board of
trustees of the Stern School of New York University. She also serves
as a member of the board of the Business Council of the United
Nations and is a member of INSPAC, the advisory committee of the
U.S. Trade Commission.
WILLIAMS PHOTO WALTER F. WILLIAMS, 68, a director of the Corporation since 1989, is
(a)(f)(s) retired. He previously served as Chairman, President and Chief
Executive Officer of Bethlehem Steel Corporation from 1986 to 1992.
He serves on the board of trustees of Moravian College and is a
director of Wilmington Trust Company FSB.
</TABLE>
INFORMATION CONCERNING DIRECTORS WHOSE TERMS EXPIRE IN 1999:
<TABLE>
<S> <C>
MCGUINN PHOTO MARTIN G. MCGUINN, 54, a director of the Corporation since December
(a)(d) 1996, has been Vice Chairman of Mellon Bank Corporation since 1990.
He serves on the boards of directors of MasterCard International,
University of Pittsburgh Medical Center System and the Pennsylvania
Chamber of Business and Industry. He is a trustee of The Carnegie
Museums of Pittsburgh and a member of The Bankers Roundtable.
MCKINNEY PHOTO DAVID E. MCKINNEY, 62, a director of the Corporation since 1988, is
(c)(e)(f) Director of the Watson Foundation. He previously served as Senior
Vice President (1987-1992) and Vice President (1979-1987) of IBM
Corporation and as Director General, IBM Europe (1988-1991). He
serves on the boards of trustees of Brown University and the New
York Philharmonic, on the boards of directors of Organization
Research Counselors, Fraunhofer Center for Research and PAXAR
Corporation, and is an overseer of the Thomas J. Watson, Jr.
Institute of International Studies.
</TABLE>
5
<PAGE> 8
<TABLE>
<S> <C>
MATHIESON PHOTO ANDREW W. MATHIESON, 68, a director of the Corporation since 1966,
(c)(d)(e)(f) has been Executive Vice President of Richard K. Mellon and Sons,
investment management and philanthropy, since 1978. He serves on the
boards of directors of Mellon Bank Corporation and Mellon Bank, N.A.
ROSS PHOTO STEPHEN A. ROSS, 53, a director of the Corporation since 1993, has
(e)(f) been Sterling Professor of Economics and Finance at Yale University
since 1985. He is also Co-Chairman of Roll & Ross Asset Management
Corporation. He serves on the board of trustees of the College
Retirement Equities Fund and is a trustee of CalTech.
</TABLE>
- ---------------
(a) Member of the Audit Committee
(c) Member of the Compensation and Personnel Committee
(d) Member of the Committee on Directors
(e) Member of the Executive Committee
(f) Member of the Finance Committee
(s) Member of the Shareholder Relations and Public Affairs Committee
6
<PAGE> 9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At December 31, 1996, the only persons known by management to be beneficial
holders, directly or indirectly, of more than 5% of the Common Stock are FMR
Corp. and the Capital Group Companies, Inc. FMR Corp. reported in a Schedule 13G
dated February 14, 1997 that it, and certain related persons, beneficially owned
7,006,858 shares of Common Stock (7.0% as of March 26, 1997), with respect to
which it had sole voting power over 559,844 shares and sole dispositive power
over 7,006,858 shares. The Capital Group Companies, Inc. reported in a Schedule
13G dated February 12, 1997 that it beneficially owned 5,478,690 shares of
Common Stock (6.0% as of March 26, 1997), with respect to which it had sole
voting power over 1,302,540 shares and sole dispositive power over 5,478,690
shares. All of the outstanding shares of Preferred Stock are held by the ESSOP.
The following table shows the number of shares of the Corporation's Common
Stock beneficially owned as of March 1, 1997 by each director and nominee for
director and by the executive officers named in the Compensation Table included
in this Proxy Statement (including the beneficial ownership of Preferred Stock
held by the ESSOP, which is reported as shares of Common Stock because the
Preferred Stock is convertible into and votes with the Common Stock as a class).
Except as otherwise indicated, each person has sole voting and investment power
with respect to the shares shown.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES
COMMON STOCK UNDERLYING TOTAL SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) SHARE UNITS(2) AND SHARE UNITS
---------------------------------- --------------------- ---------------- ---------------
<S> <C> <C> <C>
Lucy Wilson Benson................ 495 -- 495
Walter M. Cabot................... 522 7,327 7,849
Ronald E. Ferguson................ 78,627 11,585 90,212
William C. Ferguson............... 2,195 1,178 3,373
Ernest C. Frohboese............... 7,146 3,170 10,316
James E. Gustafson................ 28,756 5,821 34,577
Tom N. Kellogg.................... 23,401 3,841 27,242
Donald J. Kirk.................... 695 3,672 4,367
Kay Koplovitz..................... 195 1,941 2,136
Peter Lutke-Bornefeld............. -- 10,188 10,188
Edward H. Malone.................. 895 2,435 3,330
Andrew W. Mathieson............... 3,416 7,118 10,534
Martin G. McGuinn................. 65 90 155
David E. McKinney................. 2,998 1,382 4,380
Stephen A. Ross................... 1,195 1,616 2,811
Walter F. Williams................ 1,195 1,168 2,363
All directors and executive
officers as of March 1, 1997 as
a group (27 persons)............ 204,815(3)(4) 76,311 281,126
</TABLE>
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(1) Includes shares of Common Stock held in the names of spouses and children,
as to which beneficial ownership is disclaimed. No person named above
beneficially owns more than 1% of the outstanding stock. Does not include
the following shares underlying stock options exercisable
(Footnotes continued on following page)
7
<PAGE> 10
(Footnotes continued from preceding page)
within 60 days: Ronald E. Ferguson: 63,428 shares; James E. Gustafson: 40,432
shares; Tom N. Kellogg: 46,725 shares; Peter Lutke-Bornefeld: 7,800 shares;
Ernest C. Frohboese: 27,984 shares; and all executive officers as of March 1,
1997 as a group: 293,480 shares.
(2) Non-employee directors may elect to defer all or part of their compensation
to be held in deferral accounts either in cash or as units equivalent to
shares of Common Stock ("share units"). Executive officers may receive a
portion of their bonuses in share units and may receive, in appropriate
circumstances, share units subject to certain restrictions ("restricted
share units"). Share units and restricted share units carry no voting
rights. Also, executive officers receive awards of share units under the
Supplemental Benefit Equalization Plan (the "SBEP") to the extent that
shares of Preferred Stock cannot be allocated to an executive officer under
the terms of the ESSOP because of limits imposed by the Internal Revenue
Code of 1986. In addition, Peter Lutke-Bornefeld holds 10,188 restricted
share units: 5,138 will convert to unrestricted shares of Common Stock on
January 3, 2000; and 5,050 will convert to unrestricted shares of Common
Stock on April 8, 2006.
(3) Shares of Preferred Stock are allocated to the accounts of participants in
the ESSOP pursuant to the terms of the ESSOP. Distributions under the ESSOP
are made in cash or shares of Common Stock into which the Preferred Stock is
convertible. The participants in the ESSOP have the right to instruct the
trustee with respect to the vote of the shares allocated to their accounts
and a portion of the Preferred Stock that has not been allocated to any
participant's account or for which no instructions are timely received by
the trustee, whether or not allocated to the account of any participant. The
number of shares of Common Stock disclosed above includes the shares of
Preferred Stock allocated to each participant's account but excludes any
unallocated shares because of the trustee's fiduciary duty relating to the
voting of unallocated shares under the Employee Retirement Income Security
Act of 1974. The number of shares allocated to the accounts of the persons
named above, if any, and the minimum number of unallocated shares as to
which they may give voting instructions are as follows: Ronald E. Ferguson:
760 allocated shares, 2,420 unallocated shares; James E. Gustafson: 728
allocated shares, 2,316 unallocated shares; Tom N. Kellogg: 1,105 allocated
shares, 3,513 unallocated shares; Ernest C. Frohboese: 811 allocated shares,
2,589 unallocated shares; and all executive officers as of March 1, 1997 as
a group: 344,758 allocated shares and 1,379,278 unallocated shares.
(4) Includes stock that is subject to restrictions on resale. Ronald E. Ferguson
holds 18,750 restricted shares (3,750 restricted until June 1997; 15,000
restricted until January 2002); James E. Gustafson holds 17,500 restricted
shares (2,500 restricted until June 1997; 2,500 restricted until September
1999; 2,500 restricted until November 2001; 10,000 restricted until October
2006); Tom N. Kellogg holds 5,000 restricted shares (5,000 restricted until
February 2000); Ernest C. Frohboese holds 6,500 restricted shares (6,500
restricted until September 2000); and all executive officers as of March 1,
1997 as a group hold 79,200 restricted shares.
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<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The aggregate of all plan and non-plan compensation paid to the
Corporation's Chief Executive Officer and the four most highly compensated
executive officers other than the Chief Executive Officer (collectively the
"named executives") by the Corporation and its subsidiaries to the named
executives for services in all capacities to the Corporation and its
subsidiaries during the three fiscal years ended December 31, 1996 is shown in
the following table:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
AWARDS
-------------------- PAYOUTS
ANNUAL COMPENSATION RESTRICTED --------
--------------------- STOCK OPTIONS LTIP ALL OTHER
NAME AND SALARY BONUS AWARD(S) SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(1) (#)(2) (#)(3) ($)(4) ($)(5)
- --------------------------- ---- -------- -------- ---------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald E. Ferguson......... 1996 $900,000 $882,833 $ 230,120 35,699 $219,600 $ 67,453
Director, Chairman and 1995 852,083 682,500 193,333 41,982 192,378 50,076
Chief Executive Officer 1994 810,417 647,500 270,928 176,528 306,884 49,067
James E. Gustafson......... 1996 589,583 450,483 155,490 15,711 113,180 41,973
President and Chief 1995 533,333 412,500 122,222 30,636 93,824 32,000
Operating Officer
Tom N. Kellogg............. 1996 541,250 371,685 95,769 10,083 103,901 40,923
Executive Vice President 1995 511,667 381,500 733,041 20,008 104,514 30,700
Peter Lutke-Bornefeld...... 1996 592,333(6) 232,183 792,500 9,000 0 0
Executive Vice President 1995 528,105(6) 268,500 617,500 19,000 0 0
Ernest C. Frohboese........ 1996 360,000 260,168 85,252 5,972 1,038 27,613
Vice President,
Investments 1995 341,667 225,000 137,167 5,897 52,593 21,242
1994 324,167 240,000 313,464 6,497 101,840 19,892
</TABLE>
- ---------------
(1) Includes, except as noted below, cash amounts paid as an annual bonus (the
"Annual Incentive Bonus") under certain provisions of the General Re
Corporation 1995 Long-Term Compensation Plan (the "Compensation Plan") or
the 1989 Long-Term Compensation Plan (the "Prior Plan") for services
rendered during the specified calendar year. Dr. Lutke-Bornefeld's bonus was
awarded by the Corporation's subsidiary, Kolnische
Ruckversicherungs-Gesellschaft AG and its subsidiaries ("Cologne Re"), and,
for 1996, includes an estimate based upon the guaranteed bonus provided by
his employment agreement.
(2) Includes restricted stock, restricted share units and share units that were
granted under the Compensation Plan or the Prior Plan. Share units were
granted in lieu of cash bonuses awarded (a) under the Annual Incentive Bonus
provisions of the Compensation Plan or the Prior Plan; or (b) under the
provisions of the Prior Plan providing for bonus payments subject to the
performance of the Corporation over a five-year period (the "Performance
Bonus"). At December 31, 1996, Ronald E. Ferguson held 18,750 restricted
shares and 6,137 share units for a total of 24,887 shares worth $3,944,590;
James E. Gustafson held 17,500 restricted shares and 3,531 share units for a
total of 21,031 shares worth $3,333,414; Tom N. Kellogg held 5,000
restricted shares and 2,231 share units for a total of 7,231 shares worth
$1,146,114; Peter Lutke-Bornefeld held restricted share units for 10,188
shares worth $1,614,798; Ernest C. Frohboese held 6,500 restricted shares
and 2,131 share units for a total of 8,631 shares worth $1,368,014.
Dividends are paid on restricted stock and dividend equivalents are accrued
on restricted share units and share units and convert to Common Stock at the
same time as the units convert.
(Footnotes continued on following page)
9
<PAGE> 12
(Footnotes continued from preceding page)
(3) Includes regular grants of non-qualified stock options ("NQSOs"), grants of
replacement options (see footnote (2) to the Option Grants Table) and
restricted stock options granted under the Compensation Plan or the Prior
Plan. Restricted stock options were granted in lieu of cash bonuses awarded
under the Annual Incentive Bonus and Performance Bonus provisions of the
Compensation Plan or the Prior Plan.
(4) Includes amounts paid in cash and shares of Common Stock awarded under the
Performance Bonus provisions of the Prior Plan.
(5) Includes for 1996: corporate allocations under the ESSOP; the unfunded book
account under the SBEP; and the current dollar value of the benefit to the
Corporation's named executives of the premiums paid by the Corporation
during 1996 under the Corporation's split dollar life insurance plan.
<TABLE>
<CAPTION>
SPLIT-DOLLAR
NAME ESSOP SBEP POLICY
---------------------------------------- ------- ------- ------------
<S> <C> <C> <C>
Ronald E. Ferguson...................... $9,628 $45,000 $ 12,825
James E. Gustafson...................... 9,628 26,375 5,970
Tom N. Kellogg.......................... 9,628 23,475 7,820
Peter Lutke-Bornefeld................... 0 0 0
Ernest C. Frohboese..................... 9,628 12,600 5,385
</TABLE>
(6) Includes $108,757 paid as directors' fees by Cologne Re.
10
<PAGE> 13
OPTION GRANTS TABLE
The options granted or awarded in 1996 to the named executives are shown in
the following table (no stock appreciation rights were granted in 1996 to the
named executives, and none have been granted since 1987):
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE GRANT EXPIRATION --------------------
NAME GRANTED (#) FISCAL YEAR (S/SH) DATE DATE 0% 5%
- ------------------------------ ----------- ------------ --------- -------- ---------- --- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald E. Ferguson............ 8,402(2) .7031% $154.9375 01/04/96 12/09/02 $ 0 $ 523,602
6,620(2) .5539 153.3125 03/07/96 12/08/03 0 466,849
75(3) .0063 146.7500 03/21/96 03/21/06 0 6,921
23,000(3) .9247 149.4375 06/12/96 06/12/06 0 2,161,550
3,583(2) .2998 168.2500 11/26/96 12/14/04 0 289,974
377(4) .0315 154.6875 01/09/97 01/09/07 0 36,675
4,057(4) .3395 170.6250 02/28/97 02/28/07 0 435,336
------- ------ --------- ---- --------------
46,114 3.8591% $154.3602 $ 0 $ 3,920,907
James E. Gustafson............ 75(3) .0063% $146.7500 03/21/96 03/21/06 $ 0 $ 6,921
14,000(3) 1.1716 149.4375 06/12/96 06/12/06 0 1,315,726
360(4) .0301 154.6875 01/09/97 01/09/07 0 35,021
1,299(4) .1087 170.6250 02/28/97 02/28/07 0 139,389
------- ------ --------- ---- --------------
15,734 1.3167% $151.2941 $ 0 $ 1,497,057
Tom N. Kellogg................ 75(3) .0063% $146.7500 03/21/96 03/21/06 $ 0 $ 6,921
9,000(3) .7532 149.4375 06/12/96 06/12/06 0 845,823
331(4) .0277 154.6875 01/09/97 01/09/07 0 32,200
1,072(4) .0897 170.6250 02/28/97 02/28/07 0 115,031
------- ------ --------- ---- --------------
10,478 0.8768% $151.7518 $ 0 $ 999,975
Peter Lutke-Bornefeld......... 9,000 .7532% $149.4375 06/12/96 06/12/06 $ 0 $ 845,823
Ernest C. Frohboese........... 75(3) .0063% $146.7500 03/21/96 03/21/06 $ 0 $ 6,921
5,000(3) .4184 149.4375 06/12/96 06/12/06 0 469,902
762(4) .0638 154.6875 01/09/97 01/09/07 0 74,128
563(4) .0471 170.6250 02/28/97 02/28/07 0 60,412
------- ------ --------- ---- --------------
6,400 .5356% $151.8949 $ 0 $ 611,363
All Stockholders.............. N/A N/A N/A N/A N/A $ 0 $7,654,978,495
All Optionees................. 832,880(3) 100% $149.2316 Various 10 Years $ 0 $ 78,166,221
Options Gain as % of all
Stockholder Gain............ N/A N/A N/A N/A N/A N/A 1.0%
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
OPTION TERM(1)
--------------------
NAME 10%
- ------------------------------ ---------------
<S> <C>
Ronald E. Ferguson............ $ 1,217,860
1,110,683
17,541
5,477,792
695,488
92,942
1,103,229
---------------
$ 9,715,535
James E. Gustafson............ $ 17,541
3,334,308
88,751
353,240
---------------
$ 3,793,840
Tom N. Kellogg................ $ 17,541
2,143,484
81,602
291,511
---------------
$ 2,534,138
Peter Lutke-Bornefeld......... $ 2,143,484
Ernest C. Frohboese........... $ 17,541
1,190,824
187,857
153,097
---------------
$ 1,549,319
All Stockholders.............. $19,399,205,380
All Optionees................. $ 198,089,431
Options Gain as % of all
Stockholder Gain............ 1.0%
</TABLE>
- ---------------
(1) The dollar amounts under these columns are the results of calculations at
assumed annual rates of stock price appreciation of 0%, 5% and 10%. These
assumed rates of growth were selected by the Securities and Exchange
Commission for illustration purposes only. They are not intended to forecast
possible future appreciation, if any, of the Corporation's stock price. No
gain to the optionees is possible without an increase in stock prices, which
will benefit all stockholders. A 0% gain in stock price will result in a 0%
benefit to optionees.
(Footnotes continued on following page)
11
<PAGE> 14
(Footnotes continued from preceding page)
(2) Replacement options were granted following the tender of a like number of
shares to satisfy the option price, plus required tax withholding, upon
exercise of the underlying stock option. Replacement options have the same
expiration date as the original option and an exercise price equal to the
market price at the date of the new grant. They are first exercisable one
year from the grant date provided the employee still owns the shares
acquired as a result of the original option exercise, less the number of
shares withheld to pay income tax due as a result of exercising the original
option.
(3) The Corporation's practice is to make annual grants of NQSOs to its
executive officers. These NQSOs have a 10-year term and become exercisable
in 20% increments each year over a five-year period. These options have the
replacement option feature described in footnote (2).
(4) Restricted stock options were granted under the Compensation Plan during the
first quarter of 1997 in lieu of a portion of cash bonuses awarded under the
Annual Incentive Bonus provisions of the Compensation Plan and the 1992 to
1996 Performance Bonus provisions of the Prior Plan. These options are
exercisable immediately, but shares acquired are restricted from being sold
for five years from the grant date and are forfeitable for termination due
to cause or the unauthorized use of proprietary information. These options
have the replacement option feature described in footnote (2).
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES TABLE
The realized value of aggregated option exercises during 1996 and the value
of unexercised in-the-money options at December 31, 1996 held by the named
executives are shown in the following table:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY
SHARES ACQUIRED FY-END (#) FY-END ($)
ON EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ------------------ --------------- ------------ -------------- ---------------------
<S> <C> <C> <C> <C>
Ronald E.
Ferguson........ 43,442 $ 1,908,114 50,747/216,097 $1,552,000/$1,418,367
James E.
Gustafson....... 12,759 791,194 35,748/ 47,975 1,497,668/ 962,269
Tom N. Kellogg.... 0 0 43,297/ 33,775 2,320,035/ 736,381
Peter Lutke-
Bornefeld....... 0 0 5,800/ 27,200 134,938/ 449,750
Ernest C.
Frohboese....... 0 0 26,634/ 15,375 1,487,096/ 334,900
</TABLE>
12
<PAGE> 15
LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE
The awards made during 1996 under the Compensation Plan to the named
executives are shown in the following table:
<TABLE>
<CAPTION>
ESTIMATED FUTURE
PAYOUTS
PERFORMANCE UNDER NON-STOCK
NUMBER OF OR OTHER PRICE-BASED PLANS
SHARES, UNITS PERIOD UNTIL -------------------
OR OTHER MATURITIES THRESHOLD TARGET MAXIMUM
NAME RIGHTS (#) OR PAYOUT ($ OR #) ($ OR #) ($ OR #)
- --------------------------------- ------------- ------------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
Ronald E. Ferguson............... (1) 1996-2000 $ 0 $405,000 $810,000
James E. Gustafson............... (1) 1996-2000 0 265,312 530,624
Tom N. Kellogg................... (1) 1996-2000 0 216,500 433,000
Ernest C. Frohboese.............. (1) 1996-2000 0 126,000 252,000
</TABLE>
- ---------------
(1) Executive officers, other than Peter Lutke-Bornefeld, have the right to
receive awards under the Performance Bonus provisions of the Prior Plan
until 1998 and under the Performance Bonus provisions of the Compensation
Plan until 2001. Performance Bonus distributions under the Prior Plan and
the Compensation Plan are made during the first quarter of each year with
respect to the five-year period ending at the end of the preceding calendar
year and are included in the Summary Compensation Table. The amount
distributable, if any, is determined by the Compensation Committee at the
end of the performance period on the basis of results. Awards may be paid in
the discretion of the Compensation Committee in cash, in shares of Common
Stock, in a combination of cash and shares, in share units, in restricted
NQSOs, or in a combination of such units and restricted NQSOs.
COMPENSATION OF DIRECTORS
The directors, except for those who are also employees of the Corporation,
receive an annual retainer of $27,500 and $1,000 for each Board or committee
meeting attended. In addition, non-employee chairmen of board committees are
paid an annual retainer of $2,500.
Under the non-employee directors' stock option provisions of the
Compensation Plan (the "Directors' Program"), each non-employee director is
granted an NQSO on the first business day of each calendar year of board service
to purchase 500 shares of Common Stock. The directors' stock options are
exercisable six months after the date of grant at an exercise price equal to the
fair market value of the Common Stock on the date of grant and have a term of 10
years. The exercise price of any option may be paid in cash or previously owned
shares of Common Stock having a fair market value equal to the exercise price or
in a combination of cash and shares. When previously owned shares of Common
Stock are used to exercise a non-employee director stock option, a replacement
option is issued to the director.
In addition, under the Compensation Plan, each non-employee director
receives an automatic grant of 65 shares of restricted stock on the first
business day of each calendar year in which the individual is a member of the
Board of Directors. The restrictions on such shares lapse upon the later of five
years from the date of grant or retirement from the Board of Directors.
Non-employee directors are permitted to defer all or part of their
compensation to be held in a deferral account either as cash, to which interest
at a market rate is credited quarterly, or as units equivalent to shares of
Common Stock, to which amounts equivalent to dividends paid on such shares are
credited quarterly.
13
<PAGE> 16
Any director who has completed five or more years of service as a
non-employee director, upon his or her retirement from the Corporation's Board
of Directors, will receive an annual amount equal to 75% of the final retainer,
to be paid for the greater of five years or the complete number of years of
service following the 1987 annual meeting of stockholders.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS
The Corporation's subsidiary, Cologne Re, entered into an employment
agreement effective October 15, 1996, (the "Agreement") with Peter
Lutke-Bornefeld. The Agreement provides for Dr. Lutke-Bornefeld's employment as
Chief Executive Officer of Cologne Re until December 31, 1999. Dr.
Lutke-Bornefeld is entitled to an annual salary of DM 750,000, which can be
increased at the discretion of the Board of Directors of Cologne Re, and an
annual incentive payment determined by the Chairman of Cologne Re's Supervisory
Board based upon the achievement of certain agreed upon goals. For 1996 and
1997, Dr. Lutke-Bornefeld has a guaranteed minimum bonus of DM 350,000 each
year. The Agreement also entitles Dr. Lutke-Bornefeld to "transition payments"
if his Agreement is not renewed, except under certain circumstances. These
payments will be based upon 50% of the annual salary last paid to him under the
Agreement, adjusted for his age and pension entitlement upon nonrenewal of the
Agreement. Such payments will be offset by certain income derived by Dr.
Lutke-Bornefeld from other sources.
Awards under the Compensation Plan and the Prior Plan may accelerate upon a
"change in control" of the Company as defined in both Plans. Upon a change in
control: (i) all stock options become immediately exercisable; (ii) all
Performance Bonuses become immediately payable at the higher of the amount
determined assuming the performance objectives have been met or the amount
payable based on actual performance achieved and then are prorated for the term
of the award period; (iii) all Annual Incentive Bonuses become payable at the
amount determined assuming the performance objectives have been met and then are
prorated over the portion of the year that has elapsed; (iv) all restrictions on
restricted stock options will lapse and share units attributable to bonuses will
become fully payable; and (v) restrictions on restricted stock and all other
share units will lapse if the grantee's employment is terminated within two
years after the change in control, provided that the Committee may determine, in
its discretion, to vest all or some percentage of the grantee's restricted stock
and/or share units at the time of the change in control. If such an event were
to have occurred on December 31, 1996, the cash value of outstanding stock
options, restricted stock, Annual Incentive Bonuses and Performance Bonuses
affected by such event, without regard to the actual performance by the
Corporation, payable to the named executives would be as follows: Ronald E.
Ferguson, $7,202,242; James E. Gustafson, $6,017,833; Tom N. Kellogg,
$4,525,479; Peter Lutke-Bornefeld $584,688; and Ernest C. Frohboese, $3,284,246.
Under the SBEP, previously accrued benefits become immediately vested in
the event of a "change in control," as defined in the Plan. If a participant in
the SBEP is terminated other than "for cause," as defined in the Plan, within
two years following a change in control, the participant is entitled to a lump
sum payment of the accrued benefits.
In May 1996, the Corporation entered into severance agreements with certain
executive officers including three of the named executives, Mr. Ferguson, Mr.
Gustafson and Mr. Kellogg, which provide severance benefits to the executive
officers if their employment with the Corporation is terminated following a
"change in control" of the Corporation, as defined in the agreements. Each of
the agreements provides for a severance payment if the executive officer's
employment is terminated within two years after a change in control of the
Corporation and prior to attaining age 65, unless the executive officer's
employment is terminated by the Corporation, or its successor, for "cause,"
because of the executive officer's death, disability or "retirement" or by the
executive officer's voluntary
14
<PAGE> 17
termination for other than "good reason," as such terms are defined in the
agreements. The severance benefits will be a lump sum payment equal to three
times annual compensation (i.e. base salary and target Annual Incentive bonus,
as defined in the agreements) plus the amount of any excise tax and the amount
of the tax thereon, and certain employee benefits for 36 months from the date of
termination, or a lump sum payment to the extent a plan does not permit
continued participation.
Under the Corporation's Severance Pay Plan, employees, including Mr.
Frohboese, a named executive, are entitled to receive certain severance benefits
upon their termination of employment within two years following a change in
control. Under this plan, Mr. Frohboese is entitled to receive a lump sum
payment in an amount equal to twice the aggregate of his salary and target
Annual Incentive bonus plus the amount of any excise tax and the amount of the
tax thereon.
MAXIMUM RETIREMENT BENEFITS PAYABLE
The following table shows the maximum annual retirement benefits payable at
the normal retirement age of 65 for specified remunerations and years of
credited service under the Employee Retirement Plan of General Re Corporation
and its Affiliates and the SBEP. The benefits shown in the table are subject to
a reduction of up to 50% of primary Social Security benefits.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
----------------------------------------------------------
REMUNERATION(1) 15 20 25 30 35
------------------ -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
$ 800,000......... $240,000 $320,000 $400,000 $440,000 $ 480,000
1,000,000........ 300,000 400,000 500,000 550,000 600,000
1,200,000........ 360,000 480,000 600,000 660,000 720,000
1,400,000........ 420,000 560,000 700,000 770,000 840,000
1,600,000........ 480,000 640,000 800,000 880,000 960,000
1,800,000........ 540,000 720,000 900,000 990,000 1,080,000
</TABLE>
- ---------------
(1) Benefits for eligible employees are computed under a formula based upon
years of service and average annual earnings (salary plus Annual Incentive
Bonus) during the three consecutive years of highest earnings during the
employee's service with the Corporation.
As of December 31, 1996, Mr. Ferguson had 27 years of credited service, Mr.
Gustafson had 27 years, Mr. Kellogg had 28 years, and Mr. Frohboese had six
years.
Dr. Lutke-Bornefeld is entitled to receive a retirement benefit under his
employment agreement in an amount equal to 50% of his then current salary (not
including directors' fees) at his retirement age of 65. The salary used for this
benefit calculation is limited to seven times the maximum for the contribution
to Cologne Re's statutory old age pension plan applying in the year pension
payments begin.
15
<PAGE> 18
COMPENSATION AND PERSONNEL COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation and Personnel Committee reports as follows:
INTRODUCTION. The Compensation and Personnel Committee (the "Committee") of
the Corporation's Board of Directors is responsible for approving and reviewing
with the Board of Directors the compensation of the Corporation's executive
officers, except to the extent such compensation is required to be determined by
Cologne Re's Supervisory Board, under applicable German law. In this role, the
Committee, or a subcommittee of the Committee, administers the 1995 Long-Term
Compensation Plan (the "Compensation Plan") under which equity-based and cash
bonus awards are made. The Committee's six members, who have never been
employees of the Corporation, meet in executive session to evaluate the
performance of and compensation paid to the Corporation's executive officers.
COMPENSATION PROGRAM. The Corporation's compensation program is designed to
attract, retain and reward executive officers in a manner that is consistent
with the long-term interests of stockholders by providing for competitive
salaries, bonuses based upon the achievement of the Corporation's business
strategy and operating objectives and equity-based awards, including stock
options and restricted stock awards, that align the interests of executive
officers to those of the stockholders.
The Corporation's total compensation program enables executive officers to
earn premier pay for premier performance and to be rewarded as value is created
for stockholders. Special emphasis is placed on fostering employee ownership of
common stock through programs which encourage executive officers to acquire
stock and receive compensation, otherwise paid in cash, in the form of share
units and restricted non-qualified stock options ("NQSOs").
The components of the total compensation program have included base salary,
annual incentives, long-term performance bonus awards, NQSOs, share units and
restricted stock awards. These components of compensation play specific roles in
attracting, rewarding and retaining executive officers and in balancing the
Corporation's short- and long-term interests. As an individual's level of
responsibility increases, a greater portion of the total compensation is "at
risk," or variable, and performance driven and the mix of total compensation
shifts for executive officers toward stock and stock option awards to more
closely align the long-term interests of executive officers and stockholders.
The Committee evaluates the Corporation's performance, executive
compensation and executive share ownership compared with those of other
property/casualty insurance and reinsurance companies and leading financial
services companies reflected in compensation surveys obtained from compensation
consultants and compares stockholder returns to the Standard & Poor's 500 and
the stockholder returns of the property/casualty and multiline insurance
companies that are subsets of the Standard & Poor's 500 and of other leading
insurance and reinsurance companies. Generally, and assuming competitive
performance, the Committee's objective has been to award amounts of total
compensation equivalent to the amounts reflected in the top of the third
quartile (that is, the 75th percentile) of the range of compensation paid by the
companies surveyed.
Based upon its analysis of the compensation surveys, operating results,
strategic performance, and stockholder returns, the Committee determines target
percentages of total compensation to be paid in the form of salaries, annual
bonuses, long-term performance bonuses and stock-based awards.
SALARY. Salary level targets are established so that the Corporation can
attract and retain the most qualified employees. The Committee approves the
individual salaries of executive officers. In determining an executive officer's
salary, the Committee considers, but does not assign specific weights to, the
16
<PAGE> 19
following factors: individual performance, corporate performance, industry
salary trends and competitive salary levels. Based on its discretion in
evaluating these factors, the Committee determines appropriate salary levels. In
addition, the Committee may vary the length of time between salary increases for
certain executive officers based upon its evaluation of the above factors.
ANNUAL INCENTIVE BONUS. Executive officers of the Corporation may be
awarded an annual incentive bonus for individual and collective efforts
resulting in the achievement of (or progress toward) an underwriting profit,
superior investment returns or achievement of other corporate and division
objectives. Prior to the beginning of a fiscal year, the Committee determines,
in writing, the performance objectives applicable to a grantee or a group of
grantees and the percentage of the annual incentive bonus to be awarded if a
performance objective is not fully achieved or is exceeded. The amount of the
annual incentive bonus is based upon a percentage of the officer's salary in
effect at the end of the fiscal year. The Committee has the discretion to award
a bonus in an amount equal to or less than the amount otherwise payable. In this
manner, the Committee can ensure that the amounts of any annual incentive awards
are commensurate with performance. Under the Compensation Plan, the aggregate
dollar amount available for annual incentive bonuses for executive officers who
are subject to the reporting requirements of the Securities Exchange Act of
1934, as amended, in any fiscal year may not exceed 1% of the consolidated net
income of the Corporation and its subsidiaries. In addition, no executive
officer may receive an annual incentive award in excess of $1,500,000. The award
may be paid out in cash, shares of Common Stock, share units or restricted
NQSOs.
PERFORMANCE BONUS. Performance bonus awards may be made to executive
officers. Award payouts are based upon the relationship between the
Corporation's total return to stockholders over the prior five-year period
("Total Return") and the weighted average return (the "Actual Return") of the
Standard & Poor's 500 Index and a peer group of property/casualty and multiline
insurance companies selected by the Committee prior to the beginning of the
five-year performance period (the "Comparison Group"). The amount of the award
paid to an executive officer is the product of a percentage (which ranges from
0% to 200% depending upon the relationship between the Corporation's Total
Return and the Actual Return of the Comparison Group) and the target award
determined for each executive officer at the beginning of the five-year period
(which is a percentage of the salary paid to such person during the last year of
the award cycle). Under the Compensation Plan, no executive officer may receive
a performance bonus award having a value in excess of $1,500,000. The award may
be paid out in cash, shares of common stock, share units or restricted NQSOs.
For the recently completed 1992 to 1996 performance period, the Corporation paid
performance bonuses having values equal to 63.92% of the target awards.
The Corporation will not make grants of performance bonus awards in future
years under the Compensation Plan. Commencing on January 1, 1997, the Committee
has determined that increased annual incentive award opportunities and
stock-based award opportunities for executive officers and other participants in
the Compensation Plan will be substituted for future grants of performance bonus
awards in order to more effectively focus their efforts on the long-term
interests of stockholders.
DEFERRAL OF ANNUAL INCENTIVE AND PERFORMANCE BONUS AWARDS. Executive
officers may elect to defer up to 100% of annual incentive and performance bonus
awards. Such deferral awards are awarded as share units and restricted stock
options pursuant to a formula adopted by the Committee in 1992. The Committee
has the authority to establish a mandatory deferral amount for certain executive
officers. Mr. Ferguson was required to defer a portion of his 1996 annual
incentive award and performance bonus for the 1992 to 1996 performance period.
STOCK-BASED AWARDS. The Corporation normally makes annual grants of NQSOs
exercisable at the market price on the grant date to executive officers of the
Corporation. The Committee determines
17
<PAGE> 20
a target size of option awards based upon a percentage of salary for each
participant but may vary the size of the grants in its discretion. In
determining the percentage for each executive officer, the Committee reviews
total compensation and stock option grant practices for the companies included
in the reviewed compensation surveys. Each stock option grant typically becomes
exercisable in 20% increments over a five-year period. In 1996, the Committee
granted stock options, not including replacement options, certain
performance-based NQSOs and NQSOs granted in lieu of annual incentive and
performance bonus awards, for a total of 119,261 shares (about 0.1% of the total
shares outstanding) to the Corporation's 16 executive officers.
The Corporation grants replacement options automatically when an executive
officer tenders a like number of shares to satisfy the option price and required
tax withholding upon exercise of a stock option. A replacement option has the
same expiration date as the original option and an exercise price equal to the
market price at the new grant date. Replacement options are issued to encourage
executive officers to exercise options early and to retain the profit in shares.
Replacement options are exercisable one year from the date of grant provided the
executive officer still owns the shares acquired as a result of the original
option exercise less the number of shares withheld to pay income tax due as a
result of exercising the original NQSO. Replacement options for a total of
19,822 shares were granted in 1996 to the Corporation's 16 executive officers.
The Committee also has the ability to grant restricted stock options in
lieu of cash annual incentive and performance bonus awards as described above.
Restricted stock options are exercisable immediately, but shares acquired are
restricted from transfer, sale, exchange or other disposition for five years
from the date of grant. Restricted stock options for a total of 13,652 shares
were granted to 10 executive officers in the first quarter of 1997 in lieu of
part of their 1996 annual incentive awards or 1992 to 1996 performance bonus
awards.
Restricted stock awards and various types of other awards, such as
restricted share units, can be made in appropriate circumstances (generally
limited) to retain key executive officers of the Corporation at the discretion
of the Committee. In 1996, 8,000 shares of restricted stock and restricted share
units for 5,000 shares were awarded to six executive officers.
OTHER BENEFITS. In 1996, the Corporation entered into change in control
type severance agreements with Mr. Ferguson and certain other executive officers
of the Corporation providing for a payment of three times the annual
compensation (defined generally as base salary and target annual incentive
bonus) should their employment with the Corporation or its successor be
involuntarily terminated other than for cause within two years following a
change in control and prior to their attaining age 65. It is the Committee's
belief that such agreements are consistent with the long-term interests of the
stockholders.
In addition, in 1996, the Committee authorized the Corporation to make
available to its executive officers and certain other officers participation in
a split-dollar life insurance plan. Under this plan, the Corporation will be
reimbursed for its contributions to premium costs from each policy's cash value
or death benefits plus an amount equal to the Corporation's cash opportunity
costs.
TAX CONSIDERATIONS. Effective January 1, 1994, Section 162(m) of the
Internal Revenue Code of 1986 (the "Code") generally denies a tax deduction to
any publicly held corporation for compensation that exceeds $1 million paid to
certain senior executives in a taxable year, subject to an exception for
"performance-based compensation" as defined in the Code and certain transition
provisions.
The Committee intends, to the extent possible, that incentive and stock
compensation paid to executive officers be deductible for federal tax purposes.
Annual incentive, performance bonus and stock option awards granted under the
Compensation Plan are believed to be deductible in
18
<PAGE> 21
accordance with Code Section 162(m). Performance bonuses and restricted stock
grants awarded under the Corporation's 1989 and 1995 Long-Term Compensation
Plans should be deductible under the transition provisions of the adopted rules
with the exception of restricted stock grants made after February 17, 1993.
CEO'S COMPENSATION. The Corporation's Chairman and Chief Executive Officer
in 1996, Ronald E. Ferguson, did not receive an increase in his base salary in
1996. This is consistent with the Committee's review of the salary levels and
total compensation for chief executive officers of the companies reflected in
the compensation surveys, and the Committee's intention to place more emphasis
on variable compensation.
Mr. Ferguson's 1996 annual incentive award was made in recognition of the
Corporation's positive underwriting performance, continued progress on the
integration with Cologne Re and global expansion, the acquisition of National Re
Corporation, the Corporation's global financial services initiatives and its
strong financial performance evidenced by the increase in the Corporation's
operating income by 13.9% over its operating income in 1995. For 1996, the
statutory combined ratio of the Corporation's property/casualty operations in
the United States was 99.1%, compared to 105.1% for the companies reporting to
the Reinsurance Association of America (excluding the Corporation and its
subsidiaries). For 1996, Mr. Ferguson received an annual incentive award in cash
in the amount of $882,833, restricted NQSOs for 4,057 shares and share units for
2,433.76 shares. Mr. Ferguson also received a bonus under the five-year
performance bonus program for the 1992 to 1996 performance period, which was
awarded in cash in the amount of $219,661, restricted NQSOs for 377 shares and
share units for 225.69 shares.
In 1996, Mr. Ferguson also received NQSOs for 23,000 shares in accordance
with the Corporation's practice of granting NQSOs on an annual basis. This grant
was determined based upon an analysis of total compensation and stock option
grant practices for CEOs of the companies reflected in the compensation surveys
and in recognition of the Corporation's strong performance and the continued
emphasis on creating stockholder value.
CONCLUSION. The Committee believes that it is consistent with the long-term
interests of stockholders for the Corporation to compensate the executive
officers competitively when their performance meets or exceeds the high
expectations of the Committee. The Committee believes the Corporation's current
compensation program meets its objectives of appropriately aligning the
interests of executive officers and stockholders.
By the Compensation and Personnel Committee: Andrew W. Mathieson, Chairman,
Walter M. Cabot, William C. Ferguson, Kay Koplovitz, Edward H. Malone,
David E. McKinney
19
<PAGE> 22
PERFORMANCE GRAPH
The following line graph compares the yearly percentage change, over five
years, in the Corporation's total stockholder return on Common Stock with the
cumulative total return on the Standard & Poor's 500 Index and the cumulative
total return of a peer group index:
Comparison of Five-Year Cumulative Total Return Among General Re
Corporation, S&P 500 Index and Peer Group Index(1)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) PEERS S&P 500 GENERAL RE
<S> <C> <C> <C>
'DEC. 31, 1991' 100 100 100
1992 117 108 116
1993 128 118 109
1994 128 120 128
1995 200 165 162
'DEC. 31, 1996' 257 203 168
</TABLE>
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(1) Assuming the investment of $100 in the Corporation's Common Stock, the
Standard & Poor's 500 Index and the peer group index on December 30, 1991
and the reinvestment of all dividends. The peer group index combines the
Standard & Poor's Multiline and Property/Casualty Indexes, except for the
Corporation, and consists of the following companies: Allstate Corporation,
American International Group, Chubb Corporation, CIGNA Corporation, ITT
Hartford Group, Loews Corporation (CNA), MGIC Investment Corporation, Safeco
Corporation, The St. Paul Companies, Travelers Group Inc. and the United
States Fidelity & Guaranty Corporation. One corporation, Aetna Life &
Casualty Company, included in the Standard & Poor's Multiline and
Property/Casualty Indexes in 1995, is no longer included in the indexes and
two corporations, MGIC Corporation and Travelers Group Inc., are now
included in the indexes.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Corporation's directors and executive officers and
persons who own more than 10% of the Corporation's outstanding Common Stock to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership in the Corporation's Common Stock and other
equity securities. Specific due dates for these records have been established
and the Corporation is required to report in this proxy statement any failure to
file by these dates in 1996. A transaction in the Corporation's Common Stock by
Kay Koplovitz, a director of the Corporation, which should have been reported in
December 1996, was reported in February 1997.
20
<PAGE> 23
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors has recommended to the Board
that Coopers & Lybrand LLP be selected as the Corporation's principal
independent public accountants. The Board selected Coopers & Lybrand LLP to
audit the financial statements of the Corporation and its domestic subsidiaries
for fiscal year 1997. This selection is being presented to the stockholders for
their ratification at this annual meeting. The firm of Coopers & Lybrand LLP has
audited the Corporation's financial statements for more than 20 years.
It is expected that representatives of Coopers & Lybrand LLP will attend
the meeting, will have the opportunity to make a statement if they so desire and
will be available to respond to appropriate stockholder questions.
Ratification of the selection of Coopers & Lybrand LLP as independent
public accountants will require the affirmative vote of a majority of the shares
present in person or represented by proxy at the annual meeting. The Board of
Directors and management recommend a vote FOR ratification and, unless a
stockholder signifies otherwise, the persons named in the proxy will so vote.
OTHER MATTERS
The Board of Directors and management of the Corporation do not know of any
other matters to be presented for action at the meeting. Should any other
matters come before the meeting, however, the persons named in the enclosed
proxy will have discretionary authority to vote all proxies with respect to such
matters in accordance with their judgment.
The expense of proxy solicitation will be borne by the Corporation. Proxies
will be solicited on behalf of the directors by Georgeson & Co. Inc. for a fixed
fee which will not exceed $13,000. In addition, expenses incurred by Georgeson &
Co. Inc. will be reimbursed by the Corporation. Proxies may also be solicited in
person or by telephone or telegraph by officers or regular employees of the
Corporation and its subsidiaries.
In order for stockholder proposals for the 1998 annual meeting of
stockholders to be eligible for inclusion in the Corporation's proxy statement,
they must be received by the Corporation at its principal office in Stamford,
Connecticut, prior to November 29, 1997.
Charles F. Barr
Secretary
March 28, 1997
21
<PAGE> 24
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PROXY/DIRECTION CARD
GENERAL RE CORPORATION
695 EAST MAIN STREET
STAMFORD, CONNECTICUT 06904-2351
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Revoking any such prior appointment, the undersigned hereby appoints
Ronald E. Ferguson, James E. Gustafson, Charles F. Barr, Elizabeth A. Monrad
and Robert D. Graham, and each of them, attorneys and agents, with full power
of substitution to vote as Proxy for the undersigned, as herein stated, at the
annual meeting of stockholders of General Re Corporation to be held at the
offices of the Corporation, 695 East Main Street, Stamford, Connecticut, on
Friday, May 23, 1997, at 9:00 A.M., and at any adjournment thereof, with
respect to the number of shares the undersigned would be entitled to vote if
personally present.
This Proxy/Direction Card will be voted as directed. In addition, the
named attorneys and agents will vote in their discretion on such other items as
may properly come before the meeting. If this Proxy/Direction Card is signed
and returned but no direction is made, it will be voted "FOR" all items set
forth hereon. This Proxy/Direction Card also serves to instruct the trustees of
the Employee Savings and Stock Ownership Plan of the Corporation on how to vote
shares held by that plan.
The Board of Directors recommends a vote "For" Items 1 and 2.
The undersigned hereby acknowledges receipt of a copy of the Proxy
Statement relating to such annual meeting.
PLEASE DATE, SIGN AND MAIL THIS PROXY CARD IN THE ACCOMPANYING ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
(CONTINUED ON OTHER SIDE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE MARK YOUR ----- |
A [X] VOTES AS IN THIS | |
EXAMPLE. | ----
FOR WITHHELD
1. Election of [ ] [ ] NOMINEES: Walter M. Cabot
Directors Ronald E. Ferguson
Donald J. Kirk
FOR, EXCEPT VOTE WITHHELD FROM THE
FOLLOWING NOMINEE(S).
----------------------------------
FOR AGAINST ABSTAIN
2. Approval of proposal to ratify the selection [ ] [ ] [ ]
of independent public accountants.
SIGNATURE(S): Dated: , 1997
------------------------------- -----------------
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR(S) HEREON. EXECUTORS,
ADMINISTRATORS, TRUSTEES, GUARDIANS OR ATTORNEYS SHOULD SO INDICATE WHEN
SIGNING. IF SIGNING FOR A CORPORATION, PLEASE INDICATE YOUR TITLE.
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